Change and Consistency; Guy Carpenter Specialty Insurance Program Issuing Carrier Survey: Little has changed at the core of the Program Administrators and Managing General Agents (MGA/PA) market from last year, though there has been activity in targeted areas. In general, the MGA/PA space has shown progress in recovering from the 2008 financial crisis and subsequent recession, indicating resilience, consistency and strength. Yet, over the past five years, since Guy Carpenter & Company began tracking the MGA/PA market, there have been some significant shifts, showing that the market has matured.

Millions of people in Japan have been affected by the Tohoku earthquake, the subsequent tsunami and the continuing situation with the Fukushima Daiichi nuclear facility. Many lives have been lost, and the country continues to cope with the aftermath of all this. This tragedy has had a direct effect on the (re)insurance industry, as well. Carriers have been working diligently to ensure that they can absorb the losses from these catastrophes, as well as the others that have occurred over the past six months.

Severe weather in southern regions of the United States spawned dozens of tornadoes on April 27, damaging hundreds of properties and killing around 200 people in five states. The fatalities occurred in Alabama, Georgia, Mississippi, Tennessee and Virginia in what is being described as the worst tornado outbreak in the United States since 310 people were killed on April 3, 1974. According to the National Weather Service (NWS), the storms spawned more than 140 tornadoes across the region and brought strong winds, heavy rain and large hail to several areas on April 27. The severe weather spread from Texas to Georgia and is forecast to hit the Carolinas before moving further northeast. Several states suffered power outages and widespread property and infrastructure damage has been reported.

Guy Carpenter & Company announced the expansion of its Global Marine & Energy Specialty with a number of key appointments. Effective immediately, Scott Price has been named Head of U.S. Marine & Energy, reporting directly to James Summers, Head of Global Marine & Energy Specialty. Steve Vivian, also reporting to Mr. Summers, has assumed a new role with responsibility for assisting in the development of the Specialty’s global marine business.

4. Floods in Queensland, Australia: Heavy rain has triggered severe floods across a huge swathe of Queensland State in Australia, affecting around 200,000 people and inundating thousands of buildings in the affected towns and cities. An area the size of France and Germany combined in southern and central Queensland has been badly affected by the floods, with several communities cut off or inundated and coal mine production disrupted. Australian Prime Minister Julia Gillard has described the situation as “a major natural disaster” and said recovery would take “a significant amount of time”. As of January 4, the Australian Bureau of Meteorology has eight flood warnings in place in Queensland. Queensland State Premier Anna Bligh said the economic damage from the floods was likely to run into the billions of dollars. The Insurance Council of Australia has declared the floods a catastrophe but no insured loss estimates have been released.

5. 2010 Catastrophe Update: Part I, Global Insured Losses in 2010: 2010 has proved difficult for the reinsurance industry. Spiraling costs from disasters in the first six months of the year particularly, coupled with overcapitalization in the reinsurance sector, created a difficult operating environment. Despite the lack of big U.S. losses in what was one of the most active Atlantic hurricane seasons on record, insured losses from global catastrophes reached USD36 billion in 2010, up from USD27 billion in 2009. Natural hazards continued to be the largest source of losses in 2010 at USD31 billion, while man-made disasters cost (re)insurers USD5 billion. Total losses (both insured and uninsured) reached USD222 billion. Some 260,000 people lost their lives to worldwide disasters in 2010, including around 220,000 people in the Haiti earthquake

6.Earthquake Strikes off Northeastern Japan: A powerful earthquake struck off the coast of northeastern Japan at 05:46:23 UTC on March 11, causing severe shaking near the epicenter region and triggering a massive tsunami, according to reports. The U.S. Geological Survey (USGS) said the earthquake measured 8.9Mw while the Japanese Meteorological Agency said it recorded a magnitude of 8.4. The USGS added that the quake was located 130 kilometers (80 miles) east of Sendai and 373 kilometers (230 miles) northeast of Tokyo, at a depth of 24 kilometers (15 miles). This is the fifth most powerful earthquake since 1900 and the largest in Japanese recorded history, according to reports. At least 40 aftershocks have hit the region since the main earthquake, the most powerful at 7.1Mw.

7. 2011 Reinsurance Renewal Rates: Overview:An overview of reinsurance rates reveals a picture of a generally softening market on an overall basis, with ample reinsurer capacity available for most lines. But beneath this generality lies a range of experiences for individual reinsurance buyers, according to the class of business, their own loss record and the territorial scope. In many cases, reinsurance purchasing strategies in a softening market were one of the few places buyers could turn to mitigate the effect of soft conditions in original markets.

8.Chart: Guy Carpenter Global Property Catastrophe Rate on Line Index:Early predictions that January 1, 2011 reinsurance renewal rates were likely to fall have been proven correct. The Guy Carpenter Global Property Catastrophe Rate on Line (ROL) Index lost 7.5 percent - the second consecutive annual decline. Contributing to this move has been a combination of factors, including moderate loss activity and abundant levels of industry surplus.

9. 2011 Outlook: Preparing for an Inflection Point: The macroeconomic environment as we enter 2011 is a challenging one for the reinsurance industry. A combination of low yields, high levels of sector capital and lower rates on-line has led to a climate of persistent low valuations and stubbornly suppressed forward earnings rates. In addition, there is no clear catalyst on the horizon. Until we see a meaningful change in one of these underlying factors, the forecast is for more of the same.

10. Solvency II Update: QIS 5 Windstorm Scenarios Are Within Range of Industry Models: European insurers and reinsurers will face requirements for full compliance with the new Solvency II capital regime requirements in just over two years. Even if this introduction is phased in - as the European Commission has reportedly indicated it could be - these requirements will have a wide-ranging and profound impact on the insurance industry throughout Europe.

Severe Weather in United States: Severe weather in southern and southeastern regions of the United States spawned dozens of tornadoes between April 14 and 16, causing widespread property damage and killing at least 45 people. The storms affected the 14 states of Alabama, Arkansas, Georgia, Illinois, Kansas, Louisiana, Maryland, Mississippi, Missouri, North Carolina, Oklahoma, South Carolina, Texas and Virginia. The violent weather began in Oklahoma on April 14 before cutting across the southern states the following day and hitting North Carolina and Virginia on April 16. According to the National Weather Service, the storms spawned more than 240 tornadoes across the region and brought strong winds, heavy rain and grapefruit-sized hail to several areas. Reports said the tornado tally over the three-day period is likely to rank among the highest in United States history. Meteorologists said there had been three main contributory factors that combined to cause the severe weather: a powerful jet stream, abundant moisture and a strong cold front moving across southern regions.

Guy Carpenter Publishes Second Part of Re/Insurance Industry’s Guide to Succeeding Under Solvency II: Guy Carpenter & Company released a new briefing, Succeeding Under Solvency II - Corporate Governance (Pillar II) and Disclosure (Pillar III), the second report in a special series for re/insurers operating in or covering risks in Europe. The new report examines: the rigorous corporate governance programs that (re)insurers will need to implement under Solvency II, covering the core functions of risk management, actuarial, internal audit and internal controls; Expectations under the Pillar II requirement of every company conducting its “own risk and solvency assessment;” the internal model approval process as an alternative to using the standard formula to determine a company’s solvency capital requirement; the two levels of disclosure - regulator and public - required under Pillar III; Catastrophe modeling documentation requirements for Solvency II compliance.

Reinsurance Market and Rate Direction Still in Transition at April 1, 2011 Renewals:With substantial first quarter insured losses from catastrophes in Australia, Japan and New Zealand and the political unrest in the Middle East and North Africa, the direction of global reinsurance rates at April 1, 2011 renewals varies by region and line of business. Guy Carpenter & Company released its annual report on the state of the reinsurance market at the April 1 renewals period. As the quarter comes to a close, it is the most costly first quarter on record for the industry.